Florida General Contractor Practice Exam

As volume and cash profits increase, what should ideally be kept under control?

1. Operating Expenses

2. Net Income

3. Assets

4. Liabilities

The correct answer is: Operating Expenses

The ideal focus on controlling operating expenses as volume and cash profits increase is essential for maintaining a healthy profit margin and ensuring sustainable growth. While it might seem counterintuitive to manage costs when revenues are rising, keeping a close eye on operating expenses allows a business to capitalize fully on increased sales without allowing costs to spiral out of control. When a business experiences growth, it often faces pressures to expand operations, hire more staff, or increase marketing efforts. These decisions can lead to a significant rise in operating expenses. However, if these costs grow at a faster rate than revenue, the business risks diminishing its profits. Therefore, it is crucial to find a balance where the increase in volume translates to improved efficiency and profitability, rather than just higher expenses. Controlling operating expenses involves careful budgeting, monitoring expenditures, and optimizing resources. This strategic approach allows a company to enhance its profitability and provide a buffer against potential downturns, ensuring that profits remain intact even in less favorable circumstances.